REIT Dividends in Danger as Interest Rate Spreads "Twist"
Paragon Report Provides Equity Research on American Capital Agency & CYS Investments
(firmenpresse) - NEW YORK, NY -- (Marketwire) -- 10/03/11 -- High yielding REIT stocks have struggled immensely since the Federal Reserve announced it will push long term interest rates lower last month. Mortgage REITs typically borrow at low rates and lend in the mortgage markets at higher rates, usually by buying mortgage-backed securities. By purchasing bonds guaranteed by the government, analysts argue these companies take on no risk of default, with the principle concern being an interest rate risk. The Paragon Report examines the outlook for diversified REITs and provides equity research on American Capital Agency Corporation (NASDAQ: AGNC) and CYS Investments, Inc. (NYSE: CYS). Access to the full company reports can be found at:
In its statement, the Fed noted that the economy is growing slowly, unemployment is high and housing remains in a prolonged slump. The central bank said in a statement that operation twist was aimed at reducing the cost of borrowing for businesses and consumers, including the cost of mortgage loans. It hopes that the lower rates will encourage companies to build new factories and hire more workers, and consumers to start spending again on homes and cars and clothes and vacations.
REITs earn their money on the spread between low-interest short-term borrowing and purchasing high-interest long-term securities. To be classified as a REIT, a company must distribute at least 90 percent of its taxable income to shareholders annually in the form of dividends.
The Paragon Report provides investors with an excellent first step in their due diligence by providing daily trading ideas, and consolidating the public information available on them. For more investment research on diversified REITs register with us free at and get exclusive access to our numerous stock reports and industry newsletters.
Last month the Securities and Exchange Commission launched a review that could subject REITs to tighter regulation. The SEC announced that it will solicit public comment to determine if mortgage real estate investment trusts should be regulated as investment companies and therefore subject to the Investment Act of 1940. The SEC noted the Investment Act didn't foresee the explosive growth of mortgage securities or the flood of other mortgage investors that have entered the industry. According to The Wall Street Journal a big concern for mortgage REITs is they will lose their ability to employ high levels of leverage if they are subject to the Investment Act. Mortgage REITs have high dividend yields partly because the managers use high leverage, which can boost returns.
The Paragon Report has not been compensated by any of the above-mentioned publicly traded companies. Paragon Report is compensated by other third party organizations for advertising services. We act as an independent research portal and are aware that all investment entails inherent risks. Please view the full disclaimer at .
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Datum: 03.10.2011 - 06:16 Uhr
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News-ID 1041598
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